Bengaluru: One of the world’s most successful automobile giants Toyota has said that it won’t expand further in India due to the high tax regime here – a decision that comes as a blow to Prime Minister Narendra Modi who has been actively trying to lure global companies to set up shop here.
Scaling up is hard as the government keeps taxes on cars and motorbikes so high, said Shekar Viswanathan, vice-chairman of Toyota’s local unit, Toyota Kirloskar Motor. The high taxes are making owning cars difficult for consumers, which in turn is keeping factories idle and not creating enough jobs, he added.
“The message we are getting, after we have come here and invested money, is that we don’t want you,” Viswanathan said in an interview. He, however, asserted that Toyota will not exit India but won’t scale up unless there are reforms.
Toyota entered India in 1997 and owns 89 per cent of the local firm.
Vehicles in India attract taxes as high as 28 per cent with additional levies ranging from 1 to 22 per cent depending on the car’s length, engine size, capacity, etc.
Earlier, General Motors had quit India in 2017 while Ford cut in business and tied up with Mahindra & Mahindra to stay afloat. India is the world’s fourth-biggest car market. Half a million jobs in the auto sector have been lost due to the pandemic.
“You’d think the auto sector is making drugs or liquor,” Viswanathan commented referring to the pattern of taxes being similar to liquor and cigarettes.
He believes that taxes on electric vehicles which are currently 5 per cent will go up once sales rise.
Maruti Suzuki India Ltd. and Hyundai Motor India Ltd. have a combined share of almost 70 per cent in India, largely because of their smaller cars.
World’s most popular electric car maker Tesla’s CEO Elon Musk has also objected to the high import duties in India, and said it would make Tesla cars unaffordable in India.
“Market India always has to precede Factory India, and this is something the politicians and bureaucrats don’t understand,” Viswanathan added. Local demand for a product has to be there before asking firms to set up, he said adding that “at the slightest sign of a product doing well, they slap it with a higher and higher tax rate”.
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